Royalty reform: USA deserves better

Every year, American taxpayers are required to file tax returns, and many receive a refund for overpayment during the previous year. While those taxpayers may feel fortunate to receive the unexpected cash, the government is not required to include accrued interest in that refund. Unfortunately, oil and gas companies are faring much better than our hardworking, taxpaying American families.

Thanks to a provision in industry-friendly legislation enacted in 1996, companies that have overpaid the government for the extraction of oil and gas from federal lands and waters are able to get their cash back with interest attached.

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This is just one example of an oil and gas royalty system that has become tilted too far in favor of industry and away from ensuring that the American people get a fair return for the extraction of these public energy resources.

Numerous reports, audits and investigations over the past several years — from the Government Accountability Office, the Interior Department’s inspector general and a commission chartered by former Interior Secretary Dirk Kempthorne — have uncovered a royalty collection system riddled with mismanagement, ineffective computer systems and downright mind-boggling rules.

Much to the detriment of the American taxpayer, these weighty but technical issues are often overlooked when it comes to reforming the federal oil and gas program.

These problems have not made headlines like those of last year, when it was revealed that certain employees within the Minerals Management Service — the office responsible for ensuring that these companies pay the royalties they owe to the American people — had shattered government ethics rules by accepting gifts from, and engaging in “cozy relationships” with, oil and gas industry representatives.

This issue also has not earned the intense scrutiny that occurred when it was discovered, several years ago, that the Interior Department forgot to put price thresholds on royalty relief for federal oil and gas leases issued in 1998 and 1999, potentially costing the American people up to $15 billion that should have gone into the Federal Treasury.

But while the technicalities of the royalties rules and regulations are not flashy, we still owe it to the American people to improve the program’s many fiscal flaws so that the government is collecting the money the people are truly owed — money that can help pay for services the American people want and deserve.

In general, the 1996 law gives oil and gas companies the sort of leeway that individual taxpayers would love to have.